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DIFC proposes novel regulations, including a Digital Assets Law, to react to global trade shifts and give digital consumers and investors legal certainty.

In order to meet the requirements of the proposed digital assets regime to other DIFC laws, the Dubai International Financial Centre (DIFC), the global financial center in the Middle East, Africa, and South Asia (MEASA) region, has proposed to enact a new Law of Security, a Digital Assets Law, and related amendments to select existing legislation.

The goal of the planned legislative enactments and the revisions to the current legislation is to guarantee that the laws of the DIFC keep up with the quick changes in global trade. In addition to the technological advancements brought about by the financial markets, the DIFC legislation will give consumers and investors in digital assets legal certainty.

“DIFC has been working closely with experts in the field of digital assets and banking and finance to create a global, groundbreaking Digital Assets Law,” said Jacques Visser, chief legal officer at DIFC. It suggests a greatly improved and modernized Law of Security system in doing so.

The Fourth Consultation Paper on the Digital Assets Law, 2023

A trillion-dollar asset class is represented by digital assets, which include NFTs, security tokens, stablecoins, and cryptocurrencies. It has a great deal of room for future innovation and market expansion. From the standpoint of regulated financial services, the main focus in many jurisdictions to far has been on regulating and imposing enforcement-related consequences on some of the practical implementations of this asset class.

The core advantages of blockchain technology, the digital assets it may produce, and their employment in a variety of use cases, however, will expand and become more significant in a far wider context.

According to Visser, “The proposed Digital Assets Law lays out a digital asset’s legal attributes, its proprietary nature, and the ways in which interested parties may control, transfer, and deal with it. The UNICTRIAL Model on Secured Transactions serves as the basis for the proposed new Law of Security, which has been modified to account for certain DIFC-related considerations. We think that these changes will elevate the legal and regulatory framework of the DIFC to the top of the global best practice list.

Digital revolution

Analyzing the legislation pertaining to digital assets

The precise legal characteristics and implications of digital assets are still up for debate, raising a number of important legal challenges. In this sense, international legal developments and common law global judgements have started to offer some clarification.

Nevertheless, no legislation has yet to be passed that offers a thorough legal framework that outlines all of the legal attributes of a digital asset. Furthermore, they don’t go into detail on how investors and users may communicate with one another and with digital assets in this asset class.

In order to establish such a thorough framework in DIFC, the DIFC is currently releasing its own Digital Assets Law proposal for public consultation, the result of a thorough study of the legal approaches taken to digital assets in other jurisdictions. To address the needs of digital assets within the broader legal framework of the DIFC, the legislative proposal also suggests amending other fundamental laws of the jurisdiction, such as the foundations legislation, contract law, bankruptcy law, law of obligations, and trust law.

Law of Security – No. 5 of 2023 Consultation Paper

Comparably, secured transaction regimes around the world have seen a considerable deal of innovation. particularly after lawmakers passed the current security statute in 2005. This involves the rise of companies and platforms that facilitate credit extension through digital asset collateral arrangements that are secured or covered, as well as the growing push to digitize global trade.

The DIFC suggests repealing the current security law in light of other legal frameworks, including UNCITRAL’s Model Law on Secured Transactions, and the upcoming new digital assets law. Consequently, it will greatly improve and modify DIFC’s securities regulation.

This will give clarification on taking security over digital assets and bring the regime into line with worldwide best practices. Along with doing this, the DIFC wants to combine the financial collateral rules into a new chapter of the proposed new law of security, repealing the current financial collateral regulations in the process.

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